CAUSES OF THEGREAT

DEPRESSION

SUPERFICIAL PROSPERITY

•Who remembers what superficial prosperity is and can give an example?

•A feeling of being well off when you really are not. This can come from buying on credit.

INDUSTRIES IN TROUBLE

• The railroad, textile and steel industries barely made a profit during the 1920s.

• The railroads lost business to new forms of transportation, such as trucks, buses, and autos.

• Mining and lumbering were no longer in demand.

• Coal experienced competition from hydroelectric power, fuel oil, and natural gas.

• Housing starts fell. Caused related industries to also fall. Ex. Furniture manufacturing and lumbering.

FARMING

• Production demand decreased after the war. Caused a drop in prices.

• But farmers still owed for their land and equipment.

• Many lost their farms.• Congress offered price supports.

LIVING ON CREDIT

• By making credit easily available, businesses encouraged Americans to pile up a large consumer debt.

• Faced with debt, consumers cut back on spending.

• As incomes fell, fewer goods were bought.

• But production increased faster than wages, resulting in an ever widening gap between the rich and the poor.

UNEVEN DISTRIBUTION OF WEALTH

• The lopsided distribution of wealth resulted in an unstable economy

• The poor and middle class could not afford to buy the things they needed, even though they were readily available

• The rich, who had money to spend had bought all they needed

• During the 1920s the rich got richer, and the poor got poorer.

• The income of the wealthiest 1% rose 75%, compared with a 9% increase for Americans as a whole.

• More than 70% earned less than $2500.

• Could not afford many of the household goods produced.

• Only half the homes had electricity or a furnace.

• Only 1 in 10 homes had a refrigerator.

Overproduction of Manufactured Goods

• People could not afford to buy products as soon as they were being made.

• This led to a surplus of goods.

• The surplus led to lower prices

• Overproduction and lower prices caused Industries to go into a slump.

• Workers were laid off.

• The auto, radio, housing, and construction industries were all affected.

STOCK MARKET

• During the 1920s those who could, invested in the stock market.

• The Stock market became the most visible symbol of a prosperous economy.

• Many people thought they could get rich quick by investing money, sometimes their life savings.

•

• As the DOW JONES INDUSTRIAL AVERAGE (the measure of a market’s health) kept rising, people kept buying.

• Everyone wanted to get onto the bandwagon.

• This led to SPECULATION- buying on the chance of a quick profit.

OVERSPECULATION

• Even those who could not afford to buy stocks, did so by borrowing, or buying on margin.

• Buying on margin is paying a small percentage of the stock’s price and borrowing the rest.

THE STOCK MARKET CRASH

• The government did not discourage or regulate the market.

• If stocks fell, investors could not pay off their loans.

• This happened on October 24,1929 (Black Thursday). Prices took a plunge.

• Panicked investors tried to unload their shares.

• October 29,1929 (Black Tuesday) the bottom fell out.

• Frantic selling.• Those who bought on credit

were stuck with huge debts.• By mid-November investors

had lost about $30 billion.

• The banks that had lent money to investors now had no money.

• Over 600 banks closed.• Stock market crash signaled the

beginning of the Great Depression.

• The economy fell and unemployment skyrocketed.

EFFECTS

• The gross national product was cut in half.

• Approx. 90,000 businesses went bankrupt.

• Led to workers losing their jobs.• One out of every 4 workers

unemployed.

• Farm prices dropped so low, sometimes below what it cost to grow the crop.

• Farmers dumped milk and destroyed crops, all while people in the cities were starving.

• Farmers couldn’t pay their mortgages, and many lost their farms.

WORLDWIDE DEPRESSION

• Europe was still recovering from the war.

• When German banks fell, they stopped paying reparations.

• U.S. limited importation of goods, which in turn made it difficult to sell American products abroad.

• Congress passed the Hawley-Smoot Tariff, which established the highest protective tariff in history.

• Wanted to protect U.S. goods from foreign competition, but it had the opposite effect.

• Prevented countries from buying American goods.

• Hoover was the president during the time of the Great Depression

• He was called a “do nothing” president because people thought he let the country fall apart without doing anything to help improve the economy.

• Hoover had defeated• Al Smith in the 1928• Election

DEPRESSION IN THE CITIES

• People lost their jobs.• Many lost their homes.• Lived in the streets or in

shantytowns.• Begged for food or stood in

soup and bread lines.

People tried to pull together to help each other and help others worse off than themselves.

Tenant groups formed to protest rent increases and evictions.

Religious, political, and charitable groups set up soup kitchens and breadlines to feed the hungry.

LIFE FOR MINORITIES

• Unemployment rate for African Americans were higher than Whites.

• Dealt with racial violence from unemployed whites.

• Latinos (Mexicans) were also targets of racial violence.

• Many sent back to Mexico.

DEPRESSION IN RURAL AREAS

• Many had lost their farms because of price declines and they were unable to pay back their loans.

• Many turned to tenant farming.• But at least they could grow

food for their families.

• In some farm communities, farms were auctioned off for low prices and then buyers returned the farms to their original owners.

THE DUST BOWL

• A drought began in the early 1930s that destroyed the Great Plains.

• In the 1920s this land had been over plowed and the protective prairie grass was removed.

• When the drought and winds arrived, nothing was left to hold the soil down.

•One windstorm in 1934 picked up millions of tons of dust and carried it to eastern cities. Some dust even landed on ships in the Atlantic.

• Many farmers gave up and packed up all their belongings and headed west, mainly to California.

• Those heading west became known as Okies or Arkies from Oklahoma or Arkansas.

• This term became a negative connotation for all migrants.

• Some found work in California, but many continued to wander.

Homeless and Jobless

• Many homeless and jobless people became drifters when they had nothing else to turn to.

• They hitchhiked from one “hobo jungle” to another.

• Thousands of men, boys, and women and children wearing men’s clothing rode the rails and slept in boxcars.

• By early 1933 about a million people were on the move, risking jail, injury, or even death.

• Even professionals and white-collar workers were laid off suddenly with no prospects of finding another job

Women and The Great Depression

• White women were often fired from their jobs and replaced by white men.

• Many women who got married or were already married were fired from their jobs or weren’t hired. Women then continued with doing only “women’s work” which was nursing, typing and domestic service.

• Women canned food, sewed clothes and maintained family budgets.

• Some cities refused to hire married women as school teachers.

• Women often ashamed to reveal their hardships.

CHILDREN SUFFER HARDSHIPS

• Poor diets and lack of money for health care led to serious health problems.

• Dramatic rise in malnutrition.• Falling budgets caused school

boards to shorten the school year or close schools.

• Many children went to work instead.

•Many teens left home to reduce the hardships.

•They would hop the trains in search of work, adventure, or to escape from poverty.

SOCIAL AND PSYCHOLOGICAL EFFECTS

• People became depressed because of the lack of food and also their lack of job/unemployment.

• Unemployment and fear of losing a job caused great anxiety.

• The suicide rate rose to more than 30 percent.

• Three times as many people were admitted to mental hospitals than during normal times.

• Many had to give up health care such as visits to the doctor or dentist.

• Young people gave up their dreams of going to college.

• Some married later and had fewer children.

• Even after the economy recovered, the Depression generation continued to watch and save their money before buying anything.

• Developed habits of saving and thriftiness that would shape a whole generation of Americans.